Hospitals projected to add 30,000 beds in the next five years: ICRA report

Close to 5,000 hospital beds are expected to be added over FY 2024 and FY 2025, said rating agency ICRA in a recent projection covering nine listed hospitals.

The broader industry also reflected similar trends of significant bed additions, said Mythri Macherla, ICRA Assistant Vice President and Sector Head. “Overall, most private players (including ICRA’s sample set companies) are expected to add over 30,000 beds in the next four to five years at an investment of ~ ₹32,500 crore,” she said. The expansions are being witnessed across metros, with cities such as Delhi NCR, Mumbai and Bangalore expected to witness sizeable bed additions in the next few years, she pointed out.

ICRA’s sample set covered Apollo Hospitals, Aster DM Healthcare (India business), Fortis Healthcare, Healthcare Global Enterprises, Krishna Institute of Medical Sciences Limited, Max Healthcare Institute, Narayana Hrudayalaya, Rainbow Children’s Medicare and Shalby Limited.

To overcome the impact of inflation, hospitals have employed cost optimisation measures, including “consolidation of suppliers and centralised procurement to enable rationalisation of consumables cost and capex, improvement in efficiencies through use of digital tools, energy consumption from renewable energy resources, and in-house management of onsite pharmacy operations, against outsourcing to third parties,” she said.

In addition to setting up new greenfield and brownfield facilities to enhance capacities, hospital chains were also looking at inorganic opportunities, which has led to increasing consolidation in the industry in the last two years, the ICRA report said. “Mergers and acquisitions aid hospital chains in diversifying their geographic reach and/or speciality mix in addition to increasing their scale of operations”, it added.

“Healthy” occupancy

The rating agency expected the aggregate occupancy for the companies reviewed to remain healthy at 64-65 per cent in FY2024 (65.1 per cent in FY2023) - “backed by sustained healthy demand for healthcare services, continued market share gains for organised players and revival in medical tourism post the pandemic.” ICRA estimated overall revenue growth at 12-14 percent in FY2024, it said.

The average revenue per occupied bed is expected to witness a healthy growth of 8-10 percent in FY2024, the agency said. “This will be aided by improving specialty and case mix, better payor mix (with a higher contribution of cash and insurance patients) and annual price revisions by companies to offset cost inflation is supporting the ARPOB growth for the sample set.” ICRA estimated overall revenue growth at 12-14 percent in FY2024, it said.